subject: What are Factoring Services and how different are they from Bank Loan Services [print this page] Financial factoring service is a financial transaction using which a business sells its invoices to a third party, which is called as a factor, in exchange for immediate money required for running the finances smoothly and continually in the business. Factoring is often misused with the term invoice discounting. Factoring receivables is basically the sale of receivables whereas invoice discounting is borrowing your receivable which is kept as collateral. These factoring services completely differ from bank loan services. They have three major differences as discussed. Firstly, in financial factoring the emphasis is on the value of the receivables rather than on organization's credit value. Secondly, factoring services involve the purchase of a financial asset i.e. the receivable, which is not a loan at all. Finally, factoring involves three parties namely the receivable, the debtor, and the factor; unlike bank loan services which involve two parties only. These three differences clearly define the major variations in these two financial services.
For any business that generates invoices for paying the customers can benefit from factoring services. The companies like pharmacies, hardware suppliers, dry cleaners, florists, and liquor distributors are significantly using this financing service. Other service industries such as security guard services, trucking companies, temp agencies are also using financial factoring services in order to meet their payroll deadlines or simply improving their business cash flow. All those companies which are facing financial crisis can get relieved from their financial worries availing these factoring services. There are various aspects of factoring services which makes them a very popular choice for most of the businesses. The financial factoring facility greatly helps in administrating the client's invoicing, sales, accounting & debt collection service. Moreover, help in credit protection of the client's debts and offer payments to the client in advance of collecting their business debts.
Having such great facilities makes this financial factoring a very popular service amongst the business houses. No matter what is your business size, these factoring services are definitely going to be of some use to your business.
What are Factoring Services and how different are they from Bank Loan Services
By: perri
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